- Posted by metre22
- On April 19, 2015
- 0 Comments
- Mergers, Metre22 Blog
As companies who are acquiring or merging approach their Day One – which we suggest defining as the first 1 to 5 days after transaction close – we think it important to remember that “opening moves cast long shadows” and can have impacts for months to come. Here are our views on a few potential missteps during this critical early period.
Acquirors are often excited about the close of a deal and want to celebrate the event. But for acquired firms, the closing often signifies the closing of a chapter that is accompanied by a sense of loss. We’ve seen executives want to decorate an acquired firm’s offices with balloons, hold popcorn and ice cream parties to mark the deal close, and even hype introductory speeches with fog machines and music. As you can imagine, these approaches rarely go over as intended.
It’s just too difficult to predict at this early juncture how things will unfold. In addition, off-handed comments that create commitments from leaders can become difficult to keep as the bigger picture comes into focus during integration planning. In most situations, it is better to say something to the effect of “We’re not sure about the direction for that area – it is something we are going to have to work together to figure out as part of our planning process. What are your thoughts about what the team needs to consider?” One thing that experienced acquirors know is that during a merger, “the truth is a moving target” and therefore the fewer up front promises and predictions leaders can make, the better chance they have of protecting their credibility in the long run.
The excitement that leaders in an acquiring firm feel, the desire to “dig in” to the integration and the fact that the acquiring firm likely has many more resources than the acquired firm can lead to an unbearable wave of distractions. Keep visits coordinated, the numbers of people manageable and make sure that leaders have access to appropriate due diligence documents so they are not asking for the same information again to kick off integration.
Speed in integration is critical to success, but moving too quickly to put up new building signage or re-branded corporate posters can be seen as an acquiror “marking their territory” and risk allowing people time to transition their allegiance to the new combined firm. Our view — make changes to corporate artifacts shortly after the new organization structure is in place and people know their futures – hopefully inside of 30 to 60 days after close.
Again, while we are fully supportive of integrating fast, not everything has to happen on Day One. Some things are required by the nature of the deal structure. Other Day One strategies though may result from over zealous efforts to unite the companies that increase the risk of having Day One be a seamless event. For instance, the rush toward Day One email connectivity, fully rationalized job titles or integrated customer data bases often causes more issues than the early progress is worth. As a good friend of mine Price Pritchett used to say “critics always get their proof first” that a deal is not working. Why arm the critics with a clunky Day One right out of the gates?